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Rendell halts further leasing in Pennsylvania state forests

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Oct. 27 -- Pennsylvania Gov. Edward G. Rendell signed an executive order halting further oil and gas development in state forests on Oct. 26. Rendell said he acted after the commonwealth’s Department of Conservation and Natural Resources (DCNR) determined that more leasing could endanger the forests’ environment. Critics responded that he was simply holding state land hostage after the state’s general assembly was unable to pass a natural gas severance tax.

Rendell said a DCNR study over 7 months found that additional oil and gas leases could jeopardize the forests’ environmental quality and character, and jeopardize Pennsylvania’s certification that it manages the its forests in a sustainable manner, which he said is important for the state’s nearly $6 billion forest products industry.

The governor, who is a Democrat leaving office in January, said the executive order was necessary after the state’s Senate, which Republicans control, refused to take up House Bill 2355, which would have instituted a moratorium and which the state’s Democrat-led House passed, with some Republican votes, in early May.

“Drilling companies’ rush to grab private lands across the state has left few areas untouched by this widespread industrial activity,” Rendell said. “We need to protect our unleased public lands from this rush because they are the most significant tracts of undisturbed forest remaining in this state. The House led the way to protect these lands, but the Senate failed to do so. That’s why it’s clear we need this executive order.”

But his action came 5 days after Rendell declared a gas severance tax dead for 2010 and blamed the Senate’s GOP leaders for refusing to hold a lame duck session after the Nov. 2 elections and work to reach a compromise with a 39¢/Mcf levy which the House approved on Sept. 29. Rendell proposed a severance tax in February of 5% of the gas’s value at the wellhead, plus 4.7¢/Mcf. On Oct. 11, he offered a compromise which would have called for a phased-in tax of 3% the first year, 4% in the second, and 5% in the third.

‘Somewhat of a puzzle’
Pennsylvania oil and gas organizations immediately questioned Rendell’s move. “The governor’s moratorium is somewhat of a puzzle to PIOGA,” said Louis D. D’Amico, president and executive director of the Pennsylvania Independent Oil & Gas Association. “The industry had been told several months ago that [DCNR] had no intention of having further leasing in the foreseeable future. It would seem that the moratorium announcement is more of an opportunity for the governor to campaign once again for a severance tax than an announcement of something new. This will have no long-term impact on the industry.”

In a May 12 announcement that Anadarko Petroleum Corp. would pay the state $120 million to lease 32,896 acres of state forest around which producers already had leases, Rendell and DCNR said the agreement would help the state meet its budget, but that no additional state forest land would be made available for leasing during the 2010-11 fiscal year.

“Holding hostage important natural gas development and the creation of new jobs and revenues over a political impasse is not sound energy policy,” observed Rolf Hanson, executive director of the Associated Petroleum Industries of Pennsylvania, on Oct. 26. “The Keystone State continues to struggle with high unemployment and budget deficits, and natural gas is part of the solution to the state’s economic problems.”

“The natural gas industry has safely and responsibly been operating on taxpayer-owned lands for years,” noted Kathryn Z. Klaber, president and executive director of the Marcellus Shale Coalition. “And this responsible production of clean-burning, homegrown natural gas is creating tens of thousands of local jobs and hundreds of millions in tax revenues for the commonwealth.”

Contact Nick Snow at nicks@pennwell.com.


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